…unlike the debt-ceiling drama and the destructive impasse over a grand bargain to rein in the spiraling national debt, a stalemate on the payroll tax could be good for Social Security, good for the deficit, and good for disproving the conviction that “temporary” tax cuts must never be allowed to expire.
Let us explain.
As we’ve pointed out previously, the 2-percentage-point cut in the payroll tax (from 6.2% to 4.2%) might give a short-term boost to the economy, but it contributes to Social Security’s long-term insolvency at a time when the retirement program is already paying out more in benefits than it is collecting in taxes. A one-year extension would drive up next year’s federal deficit by more than $100 billion.
The payroll tax issue also raises the question of whether there’s any such thing as a temporary tax cut. At the end of next year, the unaffordable Bush tax cuts are set to expire. Extending the payroll tax cut would set a precedent and give ammunition to those who want another extension of the Bush cuts, adding as much as $5 trillion to deficits over the coming decade.
The payroll tax was designed as a separate entity for the very specific reason of keeping it out of the usual Washington political games. It is there to support the Social Security Trust Fund and it should never have been tampered with in the first place.
Agree
And for two months the average person will get $165
And if I refinance (or get a new) a mortgage I’ll pay $17 more per month for the rest of my life (or at least 30 years). That’ll cost more of my money than I get to keep within the first year. Whose idea of a good deal is that – no wonder the hole keeps getting bigger
While I don’t disagree with the overall point, I do wish they would stop saying things like “…the unaffordable Bush tax cuts…” and “…adding as much as $5 trillion to deficits…”
That reinforces the unspoken impression that Washington is a fountain of money, to whom we give thanks for whatever it bestows on us. It’s not as if the Government is entitled to a certain amount, and they do us a favor if they give some of it “back” to us out of their excess (if they can “afford” it.) Likewise, there is not a fixed amount that the Government MUST spend; therefore a tax cut doesn’t intrinsically add to the deficit. Excessive spending is the cause of deficits.
It’s much harder to discuss solutions if we can’t even describe things honestly.
Connecticutian
Given that there was no effort to cut spending I would have to say that the tax cuts were unaffordable. When the government starts reducing spending, and the debt is paid off then we can talk about tax cuts.
Again, I don’t disagree, but it sounds like obfuscation to me. I think it would be more honest to say “we are not willing to cut spending, and therefore we will not have enough money if we cut these taxes.”
What’s more, I think it would be MORE honest to say “not only are we unwilling to cut spending, but we’re not willing to run a deficit either, so the new tax rate will now be increased ‘X’ because that’s what your Government actually costs.”
I can tell me kids we “can’t afford” a vacation, but the more honest truth is that “I’m not willing” to cut out my morning latte, take the bus to work, or rent a smaller apartment; and I’m not willing to put it on a credit card.
What we need, as the above have said, is honest speaking.
Washington DC is a pig’s trough of lies.
What was passed was at best a tax holiday-a suspension in the collection of withholding. It did nothing to “cut” anyone’s taxes. We all still owe the same.